Telecom Startups Seek Stay

Rule backers vow to go to high court.

Since the Telecommunications Act of 1996 became law, hundreds of new telephone companies, services and deals have sprung up in the marketplace—and almost as many lawsuits, policy disputes and lobbying battles over the laws intent have followed.

Last week, a federal appeals court issued a ruling that many of the new companies fear could put them out of business. The decision to nix regulated network access will likely head to the U.S. Supreme Court, where the question of how far the government can go to promote telephone competition could be answered.

Last weeks ruling by the U.S. Court of Appeals for the District of Columbia Circuit could lead to the demise of many competing telecommunications carriers and, consequently, higher prices in only a few months, according to some policy-makers, including Sen. Ernest Hollings, D-S.C. The decision overturns rules that the Federal Communications Commission approved last year requiring incumbent telephone companies—namely, the Regional Bell Operating Companies—to continue leasing a package of their network components (known as unbundled network elements-platform, or UNE-P) at regulated rates to startup carriers and other rivals.

For the business market, policies regarding competing local telephone carriers affect mostly small companies, which have little leverage negotiating rates with incumbent carriers.

After switching to a Competitive Local Exchange Carrier, ProScapes Professional Landscape Services Inc. cut its monthly expenses for telephone and high-speed data services about in half, said Paula Evans, owner of ProScapes, in Canton, Ga. "Were such a small company that competitiveness helps us get a better price," Evans said, adding that she hopes the existing rules supported by competitive carriers are not changed. Initially, ProScapes switched to Cbeyond Communications but switched again to Alltel Corp. when it relocated to a town that Cbeyond does not serve.

In addition to better prices, the landscaping company has gotten better customer service from the competitive carrier, Evans said. "I actually have the local telephone number of the [representative] at Alltel who set us up with our service," she said. "I used to dread having to call [the incumbent telephone company] because youd get switched over and transferred and put on hold. It was a nightmare."

The courts decision was a victory for FCC Chairman Michael Powell, who voted against the rule but was outvoted when fellow Republican commissioner Kevin Martin sided with the boards two Democrats. Powell said he intends to begin recrafting the rules that will withstand court scrutiny, but Martin and Democratic commissioners Michael Copps and Jonathan Adelstein said they will seek to stay the courts order and appeal to the Supreme Court.